Q:

How are annuity tables used?

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Quick Answer

Annuity tables provide a method for determining payment structure, individual payouts and the life of the contract, according to Investopedia. An annuity is a type of contractual payment that converts savings such as pensions into monthly or yearly payouts for individuals to live on, as the Money Advice Service explains.

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Full Answer

Annuity tables present a factor based on both time and a discount rate that is multiplied with the annuity payment to determine its present value, as explained by Investopedia. As an example, an individual with $20,000 in cash that she intends to convert to an annuity payment can use an annuity table to learn how much the annuity is worth given a fixed interest rate and a certain number of years or months.

Annuity contracts are popular with pensioners and other people who receive lump-sum payments, such as lottery winners, but do not want to spend it all at once, according to the Money Advice Service. They provide a safe and secure way of receiving steady income long after retirement or after receiving income. However, the contractual terms are very strict, and it is advised that before agreeing to an annuity plan, Individuals should do calculate the value of the annuity accurately to ensure that they make the right decision.

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